Facts of the Case

  • The petitioner challenged:
    • Notice dated 23.03.2023 under Section 148A(b)
    • Order dated 24.04.2023 under Section 148A(d)
    • Consequential notice under Section 148
  • The case pertains to Assessment Year 2019–20.
  • The Revenue alleged that the petitioner received ₹32,65,403 as rent on plant and machinery from Gannon Dunkerley & Co. Ltd.
  • The petitioner contended that:
    • The income neither accrued nor was received.
    • The entry appeared due to incorrect PAN mentioned in TDS return by Gannon Dunkerley.
  • It was further submitted that:
    • The proceedings were initiated against SMS Iron Technology Pvt. Ltd., a company that had already merged with the petitioner in 2016 pursuant to NCLT order.

Issues Involved

  1. Whether reassessment proceedings under Sections 148A(b) and 148A(d) are valid when income has not accrued to the assessee.
  2. Whether proceedings initiated against a non-existent entity are legally sustainable.
  3. Whether the Assessing Officer failed in conducting proper verification before initiating reassessment.

Petitioer’s Arguments

  • The alleged income never accrued nor was received by the petitioner.
  • The entry in Form 26AS arose due to wrong PAN quoting by Gannon Dunkerley & Co. Ltd.
  • A certificate issued by the said entity confirmed the error and clarified that the amount did not relate to the petitioner.
  • The reassessment proceedings were invalid as they were directed against a non-existent entity post-merger.

Resondent’s Arguments

  • The Revenue relied on records indicating that the petitioner had received rental income.
  • Based on such information, reassessment proceedings were initiated under the Income Tax Act.

Court Findings / Order

    • The Assessing Officer could have verified the factual position by issuing notice to Gannon Dunkerley & Co. Ltd.
  • The Court held that:
    • The reassessment order under Section 148A(d) and consequential notice under Section 148 cannot be sustained.
  • Accordingly:
    • The impugned order and notice were set aside.
    • The matter was remitted back to the Assessing Officer for fresh examination.
  • Directions issued:
    • AO may seek information from Gannon Dunkerley.
    • Opportunity of hearing must be provided to the petitioner.
    • A speaking order must be passed.

Important Clarifications by the Court

  • Reassessment cannot be sustained without proper verification of facts.
  • Proceedings initiated against a non-existent entity (post-merger) are fundamentally flawed.

Authorities must ensure due diligence before invoking reassessment provisions.
 Sections Involved

  • Section 148A(b), Income Tax Act, 1961
  • Section 148A(d), Income Tax Act, 1961
  • Section 148, Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS23052023CW70492023_162631.pdf

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